Sunset Corporation (a C corporation) had operating income of $200,000 and operating expenses of $175,000. In addition, Sunset had a $30,000 long-term capital gain, a $52,000 short-term capital loss, and $5,000 tax-exempt interest income. What is Sunset Corporation's taxable income for the year?
A) $0
B) $3,000
C) $22,000
D) $30,000
E) None of these.

Question

Quizplus · Accepted Answer

Sunset Corporation's taxable income calculation starts with its operating income of $200,000 minus operating expenses of $175,000, resulting in a net operating income of $25,000. The $30,000 long-term capital gain minus the $52,000 short-term capital loss results in a net capital loss of $22,000. However, corporations can only deduct up to $3,000 of net capital losses against ordinary income. Therefore, the $22,000 net capital loss reduces to a $3,000 deduction against the operating income. This results in a taxable income of $22,000 ($25,000 - $3,000). The $5,000 of tax-exempt interest income is not taxable. The correct taxable income is not explicitly listed among the options provided, making "None of these" the correct choice.

Sunset Corporation (A C Corporation) Had Operating Income of $200,000